Client contributed to a roth in 2023 but later realized he didn't qualify. He had put in $7500 and withdrew it plus $25 in earnings. IRS 1040 instructions say that you report the gross distribution ($7,525) on line 4a and the earnings on line 4b. They also say DO NOT file Form 8606. The code for the distribution is T which is "Roth IRA Distribution, Exception Applies".

I tried to enter the $25 of earnings in the taxable amount column on screen 13.1 but it will not take it without going through form 8606. I talked to lacerte support and they had no answer.

Has anyone had this problem and how did you handle?